What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 166 added, 126 removed, 278 unchanged (51% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

March 31, December 31,

June 30, 2021 December 31, 2020

Real estate properties:

25 unchanged sentences

Common shares of beneficial interest, $ 0.01 par value:

200,000,000 shares authorized, 48,318,366 shares issued and outstanding

200,000,000 shares authorized, 48,334,357 and 48,318,366 shares issued and outstanding, respectively

Additional paid in capital 2,616,450 2,615,305

5 unchanged sentences

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Rental income $ 137,099 $ 145,603 $ 281,623 $ 295,488

11 unchanged sentences

Loss on early extinguishment of debt ( 11,794 ) ( 557 ) ( 11,794 ) ( 3,839 )

Income before income tax expense and equity in net losses of investees 38,691 11,155

Income tax expense ( 435 ) ( 39 )

Income (loss) before income tax (expense) benefit and equity in net losses of investees ( 66,238 ) 1,794 ( 27,547 ) 12,949

Income tax (expense) benefit 121 ( 235 ) ( 314 ) ( 274 )

Equity in net losses of investees ( 580 ) ( 260 ) ( 976 ) ( 536 )

Net income 37,860 10,840

Other comprehensive loss:

Unrealized loss on financial instrument — ( 61 )

Other comprehensive loss — ( 61 )

Comprehensive income $ 37,860 $ 10,779

Weighted average common shares outstanding (basic) 48,161 48,095

Weighted average common shares outstanding (diluted) 48,196 48,095

Net income (loss) ( 66,697 ) 1,299 ( 28,837 ) 12,139

Other comprehensive income (loss):

Unrealized gain on financial instrument — 176 — 115

Other comprehensive income — 176 — 115

Comprehensive income (loss) $ ( 66,697 ) $ 1,475 $ ( 28,837 ) $ 12,254

Weighted average common shares outstanding (basic and diluted) 48,165 48,106 48,163 48,101

Per common share amounts (basic and diluted):

Net income $ 0.78 $ 0.23

Net income (loss) $ ( 1.38 ) $ 0.03 $ ( 0.60 ) $ 0.25

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

13 unchanged sentences

Balance at March 31, 2021 48,318,366 483 2,615,626 221,755 — ( 1,216,866 ) 1,620,998

Share grants 28,000 — 1,176 — — — 1,176

Share repurchases ( 12,009 ) — ( 352 ) — — — ( 352 )

Net loss — — — ( 66,697 ) — — ( 66,697 )

Distributions to common shareholders — — — — — ( 26,575 ) ( 26,575 )

Balance at June 30, 2021 48,334,357 $ 483 $ 2,616,450 $ 155,058 $ — $ ( 1,243,441 ) $ 1,528,550

Balance at December 31, 2019 48,201,941 $ 482 $ 2,612,425 $ 177,217 $ ( 200 ) $ ( 1,084,170 ) $ 1,705,754

5 unchanged sentences

Balance at March 31, 2020 48,200,929 482 2,612,777 188,057 ( 261 ) ( 1,110,681 ) 1,690,374

Share grants 28,000 — 1,121 — — — 1,121

Share repurchases ( 1,129 ) — ( 30 ) — — — ( 30 )

Net current period other comprehensive income — — — — 176 — 176

Net income — — — 1,299 — — 1,299

Distributions to common shareholders — — — — — ( 26,510 ) ( 26,510 )

Balance at June 30, 2020 48,227,800 $ 482 $ 2,613,868 $ 189,356 $ ( 85 ) $ ( 1,137,191 ) $ 1,666,430

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 37,860 $ 10,840

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 28,837 ) $ 12,139

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation 43,313 41,318

19 unchanged sentences

Distributions in excess of earnings from unconsolidated joint ventures 306 153

Distributions in excess of earnings from Affiliates Insurance Company — 287

Proceeds from sale of properties, net 166,432 81,528

Net cash provided by investing activities 113,896 42,095

Proceeds from repayment of mortgage note receivable — 2,880

Net cash (used in) provided by investing activities ( 400,467 ) 40,934

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Repayment of senior unsecured notes ( 310,000 ) ( 400,000 )

Proceeds from issuance of senior unsecured notes, net 297,699 145,275

Borrowings on unsecured revolving credit facility 420,000 481,467

Repayments on unsecured revolving credit facility ( 35,000 ) ( 281,467 )

Payment of debt issuance costs ( 941 ) ( 503 )

Repurchase of common shares ( 352 ) ( 57 )

Distributions to common shareholders ( 53,150 ) ( 53,021 )

Net cash used in financing activities ( 27,218 ) ( 146,386 )

Increase (decrease) in cash, cash equivalents and restricted cash 144,620 ( 66,690 )

Net cash provided by (used in) financing activities 246,317 ( 222,719 )

Decrease in cash, cash equivalents and restricted cash ( 36,774 ) ( 70,595 )

Cash, cash equivalents and restricted cash at beginning of period 56,855 100,696

4 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid $ 53,722 $ 53,811

Income taxes paid $ 287 $ —

NON-CASH INVESTING ACTIVITIES:

Real estate improvements accrued, not paid $ 18,472 $ 15,112

Sale of properties $ — $ 13,095

Real estate acquisitions $ ( 13,031 ) $ —

Capitalized interest $ 150 $ 69

NON-CASH FINANCING ACTIVITIES:

Repayment of mortgage notes payable related to properties sold $ — $ ( 13,095 )

SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:

As of March 31,

As of June 30,

Cash and cash equivalents $ 18,667 $ 24,485

19 unchanged sentences

Per Common Share Amounts

We calculate basic earnings per common share by dividing net income by the weighted average number of our common shares outstanding during the period.

We calculate basic earnings per common share by dividing net income (loss) by the weighted average number of our common shares outstanding during the period.

We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method.

Unvested share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per share.

The calculation of basic and diluted earnings per share is as follows:

Three Months Ended March 31,

Net income $ 37,860 $ 10,840

Income attributable to unvested participating securities ( 123 ) ( 15 )

Net income used in calculating earnings per share $ 37,737 $ 10,825

Denominators:

Weighted average common shares outstanding - basic 48,161 48,095

Effect of dilutive securities:

unvested share awards (1)

Weighted average common shares outstanding - diluted 48,196 48,095

Net income per common share - basic $ 0.78 $ 0.23

Net income per common share - diluted $ 0.78 $ 0.23

(1) For the three months ended March 31, 2020, six unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive .

For the three and six months ended June 30, 2021 and 2020, there were no dilutive common shares and certain unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive.

Real Estate Properties

As of March 31, 2021, our wholly owned properties were comprised of 180 properties containing a combined approximately 24,568,000 rentable square feet, with an aggregate undepreciated carrying value of $ 3,520,526 , including $ 45,745 classified as held for sale, and we had noncontrolling ownership interests of 51 % and 50 % in two unconsolidated joint ventures that own three properties containing a combined approximately 444,000 rentable square feet.

As of June 30, 2021, our wholly owned properties were comprised of 181 properties containing a combined approximately 24,091,000 rentable square feet.

The aggregate undepreciated carrying value of our wholly owned properties as of June 30, 2021 was $ 3,889,200 , including $ 41,236 classified as held for sale, and we had noncontrolling ownership interests of 51 % and 50 % in two unconsolidated joint ventures that own three properties containing a combined approximately 444,000 rentable square feet.

We generally lease space at our properties on a gross lease, modified gross lease or net lease basis pursuant to fixed term contracts expiring between 2021 and 2053.

Some of our leases generally require us to pay all or some property operating expenses and to provide all or most property management services.

During the three months ended March 31, 2021, we entered into 20 leases for approximately 575,000 rentable square feet for a weighted (by rentable square feet) average lease term of 5.4 years and we made commitments

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

for approximately $ 7,145 of leasing related costs.

As of March 31, 2021, we have estimated unspent leasing related obligations of $ 50,405 .

During the three months ended June 30, 2021, we entered into 25 leases for approximately 548,000 rentable square feet for a weighted (by rentable square feet) average lease term of 16.6 years and we made commitments for approximately $ 76,702 of leasing related costs.

During the six months ended June 30, 2021, we entered into 45 leases for approximately 1,123,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.9 years and we made commitments for approximately $ 83,847 of leasing related costs.

As of June 30, 2021, we had estimated unspent leasing related obligations of $ 113,099 .

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of our long lived assets.

6 unchanged sentences

Acquisition Activities

As of April 28, 2021, we have entered into an agreement to acquire a property adjacent to a property we own in Boston, MA containing approximately 49,000 rentable square feet for $ 26,975 , excluding acquisition related costs.

This acquisition is expected to occur before the end of the second quarter.

During the six months ended June 30, 2021, we acquired two properties containing a combined approximately 877,000 rentable square feet for an aggregate purchase price of $ 548,933 , including net purchase price adjustments of $ 1,761 and

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

acquisition related costs of $ 694 .

These acquisitions were accounted for as asset acquisitions.

We allocated the purchase prices of these acquisitions based on the relative estimated fair values of the acquired assets and assumed liabilities as follows:

Acquisition Date Location Number of Properties Rentable Square Feet Purchase Price Land Buildings and Improvements Acquired Real Estate Leases Assumed Real Estate Lease Obligations

June 2021 Chicago, IL (1)

1 531,000 $ 368,331 $ 42,935 $ 258,348 $ 76,136 $ ( 9,088 )

June 2021 Atlanta, GA 1 346,000 180,602 13,040 135,459 32,103 —

2 877,000 $ 548,933 $ 55,975 $ 393,807 $ 108,239 $ ( 9,088 )

(1) Purchase price includes an adjustment of $ 13,031 to record an estimated real estate tax liability as of the acquisition date.

As of July 28, 2021, we have entered into an agreement to acquire a property adjacent to a property we own in Boston, MA containing approximately 49,000 rentable square feet for $ 26,975 , excluding acquisition related costs.

This acquisition is expected to occur before the end of the third quarter.

However, this acquisition is subject to conditions;

1 unchanged sentence

Disposition Activities

During the three months ended March 31, 2021, we sold two properties containing a combined approximately 321,000 rentable square feet for an aggregate sales price of $ 130,845 , excluding closing costs.

During the six months ended June 30, 2021, we sold two properties and a warehouse facility adjacent to a property we own containing a combined approximately 1,692,000 rentable square feet for an aggregate sales price of $ 169,845 , excluding closing costs.

The sales of these properties, as presented in the table below, do not represent significant dispositions, individually or in the aggregate, nor do they represent a strategic shift in our business.

As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income.

As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).

Date of Sale Number of Properties Location Rentable Square Feet Gross

Sales Price (1)

Gain (Loss) on Sale of Real Estate

Gain (Loss) on Sale of Real Estate Loss on Impairment of Real Estate

January 2021 — Kansas City, MO (2)

1 unchanged sentence

January 2021 1 Richmond, VA 311,000 130,000 54,181 —

April 2021 1 Huntsville, AL 1,371,000 39,000 — 5,371

2 1,692,000 $ 169,845 $ 54,118 $ 5,371

1 unchanged sentence

(2) Consists of a warehouse facility adjacent to a property we own in Kansas City, MO.

As of March 31, 2021, we had two properties under agreement to sell for an aggregate sales price of $ 49,700 , excluding closing costs.

These properties were classified as held for sale in our condensed consolidated balance sheet as of March 31, 2021 and are summarized below:

As of June 30, 2021, we had three properties under agreement to sell for an aggregate sales price of $ 21,920 , excluding closing costs.

These properties were classified as held for sale in our condensed consolidated balance sheet as of June 30, 2021 and are summarized below:

Date of Sale Agreement Number of Properties Location Rentable Square Feet Gross

1 unchanged sentence

Loss on Impairment of Real Estate

February 2021 1 Huntsville, AL (2)

April 2021 1 Liverpool, NY (2)

38,000 $ 650 $ —

March 2021 1 Stoneham, MA (3)

May 2021 1 Fresno, CA (2)

532,000 6,000 33,917

May 2021 1 Memphis, TN 205,000 15,270 —

3 775,000 $ 21,920 $ 33,917

(1) Gross sales price is the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

(2) The sale of this property was completed in April 2021.

(3) The agreement to sell this property was terminated in April 2021.

In addition, in April 2021 we entered into an agreement to sell a property located in Liverpool, NY containing approximately 38,000 rentable square feet for a sales price of $ 650 , excluding closing costs.

This sale is expected to occur before the end of the second quarter of 2021.

However, this sale is subject to conditions;

accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.

(2) The sales of these properties were completed in July 2021.

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

As of June 30, 2021, we also had an additional four properties with approximately 546,000 rentable square feet classified as held for sale in our condensed consolidated balance sheet.

We recorded a $ 16,569 loss on impairment of real estate during the six months ended June 30, 2021, including $ 14,280 recorded during the three months ended June 30, 2021, to adjust the carrying value of these properties to their estimated fair values less cost to sell.

Unconsolidated Joint Ventures

1 unchanged sentence

We account for these investments under the equity method of accounting.

As of March 31, 2021 and December 31, 2020, our investments in unconsolidated joint ventures consisted of the following:

As of June 30, 2021 and December 31, 2020, our investments in unconsolidated joint ventures consisted of the following:

OPI Carrying Value of Investments at

Joint Venture OPI Ownership March 31,

Joint Venture OPI Ownership June 30,

2021 December 31, 2020 Number of Properties Location Rentable Square Feet

4 unchanged sentences

Joint Venture Interest Rate (1)

Maturity Date Principal Balance at March 31, 2021 and December 31, 2020 (2)

Maturity Date Principal Balance at June 30, 2021 and December 31, 2020 (2)

Prosperity Metro Plaza 4.09 % 12/1/2029 $ 50,000

4 unchanged sentences

None of the debt is recourse to us.

At March 31, 2021, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 7,341 is primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures.

This difference is being amortized over the remaining useful life of the related properties and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income.

At June 30, 2021, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 7,220 is primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures.

Our leases provide for base rent payments and in addition may include variable payments.

3 unchanged sentences

we have determined the fixed non-cancelable lease term of these leases to be the full term of the lease because we believe the occurrence of early terminations to be a remote contingency based on both our historical experience and our assessments of the likelihood of lease cancellation on a separate lease basis.

We increased rental income to record revenue on a straight line basis by $ 5,357 and $ 5,583 for the three months ended March 31, 2021 and 2020, respectively.

Rents receivable, excluding properties classified as held for sale, include $ 73,434 and $ 68,824 of straight line rent receivables at March 31, 2021 and December 31, 2020, respectively.

We increased rental income to record revenue on a straight line basis by $ 3,847 and $ 3,468 for the three months ended June 30, 2021 and 2020, respectively, and $ 9,204 and $ 9,051 for the six months ended June 30, 2021 and 2020, respectively.

Rents receivable, excluding properties classified as held for sale, include $ 74,674 and $ 68,824 of straight line rent receivables at June 30, 2021 and December 31, 2020, respectively.

We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred.

Such payments totaled $ 18,860 and $ 19,746 for the three months ended March 31, 2021 and 2020, respectively, of which tenant reimbursements totaled $ 17,803 and $ 18,622 , respectively.

As a result of the COVID-19 pandemic, some of our tenants have requested rent assistance.

As of April 26, 2021, we have granted temporary rent assistance totaling $ 2,483 to 18 tenants who represent approximately 3.2 % of our annualized rental income, as defined below in Note 5, as of March 31, 2021, pursuant to deferred payment plans.

These tenants are obligated to

Such payments totaled $ 17,488 and $ 36,348 for the

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

pay, in most cases, the deferred rent over a 12 -month period, all of which have commenced.

We have elected to use the Financial Accounting Standards Board, or FASB, relief package regarding the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic.

The FASB relief package provides entities with the option to account for lease concessions resulting from the COVID-19 pandemic outside of the existing lease modification guidance if the resulting cash flows from the modified lease are substantially the same as or less than the original lease.

Because the deferred rent amounts referenced above will be repaid, the cash flows from the respective leases are substantially the same as before the rent deferrals.

The deferred amounts did not impact our operating results for the three months ended March 31, 2021.

As of March 31, 2021, deferred payments totaling $ 411 are included in rents receivable in our condensed consolidated balance sheet.

three and six months ended June 30, 2021, respectively, of which tenant reimbursements totaled $ 16,639 and $ 34,442 , respectively.

For the three and six months ended June 30, 2020, such payments totaled $ 18,302 and $ 38,048 , respectively, of which tenant reimbursements totaled $ 17,229 and $ 35,851 , respectively.

Concentration

1 unchanged sentence

We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

As of March 31, 2021, the U.S.

government, 11 state governments and three other government tenants combined were responsible for approximately 36.3 % of our annualized rental income.

As of March 31, 2020, the U.S.

As of June 30, 2021, the U.S.

government, 11 state governments and four other government tenants combined were responsible for approximately 31.9 % of our annualized rental income.

As of June 30, 2020, the U.S.

government, 11 state governments and two other government tenants combined were responsible for approximately 35.1 % of our annualized rental income.

government is our largest tenant by annualized rental income and represented approximately 25.9 % and 25.0 % of our annualized rental income as of March 31, 2021 and 2020, respectively.

government is our largest tenant by annualized rental income and represented approximately 22.0 % and 25.2 % of our annualized rental income as of June 30, 2021 and 2020, respectively.

Geographic Concentration

At March 31, 2021, our 180 wholly owned properties were located in 34 states and the District of Columbia.

Properties located in California, Virginia, the District of Columbia, Texas and Maryland were responsible for 12.7 %, 12.7 %, 10.9 %, 7.9 % and 6.7 % of our annualized rental income as of March 31, 2021, respectively.

Our principal debt obligations at March 31, 2021 were:

At June 30, 2021, our 181 wholly owned properties were located in 34 states and the District of Columbia.

Properties located in California, Virginia, the District of Columbia, Illinois and Georgia were responsible for 12.1 %, 12.1 %, 9.4 %, 9.0 % and 7.9 % of our annualized rental income as of June 30, 2021, respectively.

Our principal debt obligations at June 30, 2021 were:

(1) $ 385,000 of outstanding borrowings under our $ 750,000 unsecured revolving credit facility;

(2) $ 2,062,000 aggregate outstanding principal amount of senior unsecured notes;

4 unchanged sentences

We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayment is due until maturity.

We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at March 31, 2021, on the amount outstanding under our revolving credit facility, if any.

We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at March 31, 2021.

We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at June 30, 2021, on the amount outstanding under our revolving credit facility, if any.

We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at June 30, 2021.

Both the interest rate premium and facility fee are subject to adjustment based upon changes to our credit ratings.

As of March 31, 2021 and December 31, 2020, the annual interest rate payable on borrowings under our revolving credit facility was 1.2 %.

We did not borrow any funds under our revolving credit facility during the three months ended March 31, 2021.

The weighted average annual interest rate for borrowings under our revolving credit facility was 2.6 % for the three months ended March 31, 2020.

As of March 31, 2021 and April 28, 2021, we had no amounts outstanding under our revolving credit facility and $ 750,000 available for borrowing.

As of June 30, 2021 and December 31, 2020, the annual interest rate payable on borrowings under our revolving credit facility was 1.2 %.

The weighted average annual interest rate for borrowings under our revolving credit facility was 1.2 % and 1.3 % for the three months ended June 30, 2021 and 2020, respectively, and 1.2 % and 2.1 % for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and July 28, 2021, we had $ 385,000 and $ 380,000 , respectively, outstanding under our revolving credit facility, and $ 365,000 and $ 370,000 , respectively, available for borrowing.

Our credit agreement and senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business and property manager.

Our credit agreement and senior unsecured notes indentures and their supplements also contain covenants, including covenants that restrict our ability to incur debts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to make distributions under certain circumstances.

We believe we were in

We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indentures and their supplements at June 30, 2021.

In May 2021, we issued $ 300,000 of 2.650 % senior unsecured notes due 2026 in an underwritten public offering, raising net proceeds of $ 296,758 , after deducting underwriters’ discounts and offering expenses.

These notes require semi-annual payments of interest only through maturity on June 15, 2026 and may be repaid at par plus accrued and unpaid interest on or after May 15, 2026.

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indentures and their supplements at March 31, 2021.

At March 31, 2021, six of our properties with an aggregate net book value of $ 279,559 were encumbered by mortgage notes with an aggregate principal amount of $ 170,198 .

In June 2021, we redeemed, at par plus accrued interest, all $ 310,000 of our 5.875 % senior unsecured notes due 2046.

As a result of this redemption, we recognized a loss on early extinguishment of debt of $ 8,581 during the six months ended June 30, 2021, from the write off of unamortized debt issuance costs.

Also in June 2021, we prepaid, at a premium plus accrued interest, a mortgage note secured by three properties with an outstanding principal balance of $ 71,000 , an annual interest rate of 3.55 % and a maturity date in May 2023.

As a result of the prepayment of this mortgage note, we recognized a loss on early extinguishment of debt of $ 3,213 during the six months ended June 30, 2021, from a prepayment penalty and the write off of unamortized discounts.

At June 30, 2021, three of our properties with an aggregate net book value of $ 190,969 were encumbered by mortgage notes with an aggregate principal amount of $ 98,903 .

Our mortgage notes are non-recourse, subject to certain limited exceptions and do not contain any material financial covenants.

Fair Value of Assets and Liabilities

The following table presents certain of our assets measured at fair value at March 31, 2021, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

The following table presents certain of our assets measured at fair value at June 30, 2021, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

Fair Value at Reporting Date Using

3 unchanged sentences

$ 33,300 $ — $ 6,000 $ 27,300

(1) We recorded impairment charges of $ 7,660 to reduce the carrying value of two properties that are classified as held for sale in our condensed consolidated balance sheet to their estimated fair value, less estimated costs to sell of $ 2,000 , based upon negotiated sales prices with third party buyers (Level 2 inputs as defined in the fair value hierarchy under GAAP).

(1) We recorded an impairment charge of $ 33,917 to reduce the carrying value of one property that is classified as held for sale in our condensed consolidated balance sheet to its estimated fair value, less estimated costs to sell of $ 200 , based upon a negotiated sales price with a third party buyer (Level 2 inputs as defined in the fair value hierarchy under GAAP).

See Note 3 for more information.

(2) We recorded impairment charges of $ 16,569 to reduce the carrying value of four properties that are classified as held for sale in our condensed consolidated balance sheet to their estimated fair value, less estimated costs to sell of $ 714 , based on third party offers (Level 3 inputs as defined in the fair value hierarchy under GAAP).

See Note 3 for more information.

In addition to the assets described in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, accounts payable, a revolving credit facility, senior unsecured notes, mortgage notes payable, amounts due to related persons, other accrued expenses and security deposits.

At March 31, 2021 and December 31, 2020, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:

As of March 31, 2021 As of December 31, 2020

At June 30, 2021 and December 31, 2020, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:

As of June 30, 2021 As of December 31, 2020

Financial Instrument Carrying Value (1)

12 unchanged sentences

— — 301,264 322,028

Senior unsecured notes, 6.375 % interest rate, due in 2050

156,423 174,442 156,326 171,590

Mortgage notes payable (4)

98,739 101,892 169,729 174,952

Total $ 2,131,503 $ 2,273,560 $ 2,202,971 $ 2,335,352

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 37,690 and $ 39,871 as of March 31, 2021 and December 31, 2020, respectively.

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 29,400 and $ 39,871 as of June 30, 2021 and December 31, 2020, respectively.

(2) These senior notes were issued in May 2021.

(3) These senior notes were redeemed in June 2021.

(4) Balance as of December 31, 2020 includes one mortgage note secured by three properties with an outstanding principal balance of $ 71,000 that was prepaid in June 2021.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We estimated the fair value of our senior unsecured notes (except for our senior unsecured notes due 2046 and 2050) using an average of the bid and ask price of the notes (Level 2 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date.

2 unchanged sentences

Because Level 3 inputs are unobservable, our estimated fair values may differ materially from the actual fair values.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Shareholders’ Equity

On June 17, 2021, in accordance with our Trustee compensation arrangements, we awarded to each of our eight Trustees 3,500 of our common shares, valued at $ 29.88 per share, the closing price of our common shares on Nasdaq on that day.

Share Purchases

During the six months ended June 30, 2021, we purchased an aggregate of 12,009 of our common shares valued at a weighted average share price of $ 29.33 per share, from one of our Trustees and certain former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

During the three months ended March 31, 2021, we declared and paid a regular quarterly distribution to common shareholders as follows:

During the six months ended June 30, 2021, we declared and paid regular quarterly distributions to common shareholders as follows:

Declaration Date Record Date Paid Date Distributions Per Common Share Total Distributions

January 14, 2021 January 25, 2021 February 18, 2021 $ 0.55 $ 26,575

On April 15, 2021, we declared a regular quarterly distribution to common shareholders of record on April 26, 2021 of $ 0.55 per share, or approximately $ 26,600 .

We expect to pay this distribution on or about May 20, 2021.

April 15, 2021 April 26, 2021 May 20, 2021 0.55 26,575

$ 1.10 $ 53,150

On July 15, 2021, we declared a regular quarterly distribution to common shareholders of record on July 26, 2021 of $ 0.55 per share, or approximately $ 26,600 .

We expect to pay this distribution on or about August 19, 2021.

Business and Property Management Agreements with RMR LLC

4 unchanged sentences

and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $ 9,474 and $ 4,699 for the three months ended March 31, 2021 and 2020, respectively.

The net business management fees we recognized for the three months ended March 31, 2021 include $ 5,200 of estimated business management incentive fees based on our common share total return, as defined in our business management agreement, as of March 31, 2021.

We did no t recognize any estimated business management incentive fees for the three months ended March 31, 2020.

The actual amount of annual business management incentive fees for 2021, if any, will be based on our common share total return, as defined in our business management agreement, for the three-year period ending December 31, 2021, and will be payable in January 2022.

We did no t incur a business management incentive fee payable to RMR LLC for the year ended December 31, 2020.

We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income.

Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $ 4,612 and $ 5,064 for the three months ended March 31, 2021 and 2020, respectively.

Of those amounts for the three months ended March 31, 2021 and 2020, $ 4,080 and $ 4,408 , respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income and $ 532 and $ 656 , respectively, were capitalized as building improvements, in our condensed consolidated balance sheets.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $ 10,551 and $ 20,025 for the three and six months ended June 30, 2021, respectively, and $ 4,302 and $ 9,001 for the three and six months ended June 30, 2020, respectively.

The net business management fees we recognized for the three and six months ended June 30, 2021 include $ 5,911 and $ 11,111 , respectively, of estimated business management incentive fees based on our common share total return, as defined in our business management agreement, as of June 30, 2021.

We did no t recognize any estimated business management fees for the three or six months ended June 30, 2020.

The actual amount of annual incentive fees for 2021, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2021, and will be payable in January 2022.

We did no t incur an incentive fee payable to RMR LLC for the year ended December 31, 2020.

We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

Pursuant to our property management agreement with RMR LLC, we recognized aggregate property management and construction supervision fees of $ 4,914 and $ 9,526 for the three and six months ended June 30, 2021, respectively, and $ 5,128 and $ 10,192 for the three and six months ended June 30, 2020, respectively.

Of these amounts, for the three and six months ended June 30, 2021, $ 3,935 and $ 8,015 , respectively, were expensed to other operating expenses in our condensed

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

consolidated financial statements and $ 979 and $ 1,511 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets and are being depreciated over the estimated useful lives of the related capital assets.

For the three and six months ended June 30, 2020, $ 4,242 and $ 8,650 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 886 and $ 1,542 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets and are being depreciated over the estimated useful lives of the related capital assets.

We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf.

1 unchanged sentence

Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC.

We reimbursed RMR LLC $ 6,052 and $ 5,991 for these expenses and costs for the three months ended March 31, 2021 and 2020, respectively.

We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income.

We reimbursed RMR LLC $ 5,925 and $ 11,977 for these expenses and costs for the three and six months ended June 30, 2021, respectively, and $ 6,259 and $ 12,250 for the three and six months ended June 30, 2020, respectively.

We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).

See Note 10 for more information regarding our relationships, agreements and transactions with RMR LLC.

Related Person Transactions

3 unchanged sentences

and an officer and employee of RMR LLC.

David Blackman

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

resigned as our President and Chief Executive Officer, effective December 31, 2020.

Blackman will remain in his position as our Managing Trustee, until the earliest of our 2021 annual meeting of shareholders, June 30, 2021 or such earlier date as his successor Managing Trustee is elected to our Board.

David Blackman resigned as our President and Chief Executive Officer, effective December 31, 2020, and as a Managing Trustee, effective June 17, 2021.

In replacement of Mr.

Blackman, Christopher J.

Bilotto was appointed as our President and Chief Operating Officer, effective January 1, 2021.

Bilotto previously served as our Vice President and Chief Operating Officer, and he is an officer and employee of RMR LLC.

In addition, each of our other officers is also an officer and employee of RMR LLC.

Bilotto was appointed as our President and Chief Operating Officer, effective January 1, 2021, and Jennifer Clark was elected as a Managing Trustee on June 17, 2021.

Bilotto is an officer and employee of RMR LLC, Ms.

Clark is a managing director and an executive officer of RMR Inc.

and an officer and employee of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC.

Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR LLC or its subsidiaries provide management services.

Adam Portnoy serves as chair of the boards of trustees or boards of directors of several of these public companies and as a managing director or managing trustee of these public companies.

Other officers of RMR LLC, including certain of our officers, serve as managing trustees, managing directors or officers of certain of these companies.

Other officers of RMR LLC, including Ms.

Clark, serve as managing trustees, managing directors or officers of certain of these companies.

Our Manager, RMR LLC.

3 unchanged sentences

We lease office space to RMR LLC in certain of our properties for RMR LLC’s property management offices.

Pursuant to our lease agreements with RMR LLC, we recognized rental income from RMR LLC for leased office space of $ 288 and $ 280 for the three months ended March 31, 2021 and 2020, respectively.

Pursuant to our lease agreements with RMR LLC, we recognized rental income from RMR LLC for leased office space of $ 287 and $ 575 for the three and six months ended June 30, 2021, respectively, and $ 274 and $ 554 for the three and six months ended June 30, 2020, respectively.

In June 2021, we entered into a 30 -year lease agreement with a subsidiary of Sonesta International Hotels Corporation, or Sonesta, in connection with the redevelopment of an office property we own in Washington, D.C.

as a mixed use property.

Sonesta’s lease is for the planned full-service hotel component of the property that will include approximately 230,000 rentable square feet, which represents approximately 54 % of the total square feet upon completion of the redevelopment.

The term of the lease commences upon our delivery of the completed hotel, which we estimate to occur in the first quarter of 2023.

Sonesta has two options to extend the term for 10 years each.

Pursuant to the lease agreement, Sonesta will pay us annual base rent of approximately $ 6,436 beginning 18 months after the lease commences.

The annual base rent will increase by 10 % every five years throughout the term.

Sonesta is also obligated to pay its pro rata share of the operating costs for the building.

We estimate that the total cost to build the hotel space will be approximately $ 66,000 .

Adam Portnoy is a director and controlling shareholder of Sonesta and Ms.

Jennifer Clark is also a director of Sonesta.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

For more information about these and other such relationships and certain other related person transactions, refer to our 2020 Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements